GWC upgraded to 'outperform' for withstanding impact of siege

Satyendra Pathak Doha QNB Financial Services (QNBFS) has upgraded Gulf Warehousing Company (GWC) from an"accumulate" to an"outperform", given share price weakness. In a company report released on Thursday, QNBFS said that it remained bullish on GWC as the company withstood the blockade well with its freight forwarding business bouncing back positively after an initial hit. "The company's logistics business has also picked up steam driven by contract logistics and increasing occupancy in Bu Sulba. GWC stock is down 17 percent, on a total return basis, since the beginning of the blockade against 13 percent decline in the MSCI Qatar Index (10 percent fall in the QSE Index) and we believe this underperformance is unwarranted," the report said. Once Bu Sulba reaches 100 percent occupancy later in 2018, the report said, the growth might decline.GWC should start generating substantial free cash flow from 2018 onward with free cash flow (FCF) yields increasing from 1.9 percent in 2017 to 8.3 percent in 2018, reaching 19.5 percent in 2023, it added. "Dividend yields remain at 4.5 percent for 2018 and should grow to 6.5 percent by 2023. With major capex already behind us, there could be potential upside to dividends in the medium-term," the report said.While the company's fourth quarter results came in line with its estimate, QNBFS said it expects the company to witness 10 percent top-line growth with 5 percent rise in earnings in 2018. "While contract logistics should see growth due to increased utilisation of pallet positions, the rental business could get a boost from average utilisation at Bu Sulba almost doubling to near 100 percent," the report said.The report, however, said that freight forwarding should be flattish. "We model slight uptick given greater mix of higher-margin rental revenue but net margins should drop with higher interest charges and depreciation," the report said.Development of new projects could drive GWC, the report said adding the recently announced Al Asmakh logistics park management agreement could add to long-term revenue.Corporate restructuring could boost outsourced logistics solutions and international, regional expansion could diversify operations, it said.

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